Essentials of Investments (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Essentials of Investments (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
10th Edition
ISBN: 9780077835422
Author: Zvi Bodie Professor, Alex Kane, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
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Chapter 13, Problem 5CP
Summary Introduction

(a)

To Determine:

The value of share should be determined by using constant growth model and the capital asset pricing model.

Introduction:

The value of share can be calculated by the use of two models:

  1. Constant Growth Model − It is also known as Gordon Growth Model which equates the value of share to the present value of stock's future dividends.
  2. The capital Asset Pricing Model- This model explains the relationship between systematic risk and expected return of assets.

Summary Introduction

(b)

To Determine:

The sustainable growth rate should be determined for Rio National by using balance sheet of 2009.

Introduction:

For any company or organization, sustainable growth rate plays an important function to deal with being over-leveraged and avoid financial stress.

It involves in maximizing sales and revenue growth without raising any financial leverage.

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Essentials of Investments (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)

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